SENATE BILL NO. 561
INTRODUCED BY C. KAUFMANN
A BILL FOR AN ACT ENTITLED: "AN ACT REVISING THE TAXATION OF QUALIFYING OIL AND NATURAL GAS PRODUCTION; PROVIDING THAT QUALIFYING PRIMARY OIL PRODUCTION AND QUALIFYING OIL PRODUCTION FROM HORIZONTALLY COMPLETED WELLS ARE TAXED AT A HIGHER RATE DURING A CALENDAR QUARTER IF THE PRICE OF A BARREL OF OIL EXCEEDS A CERTAIN AMOUNT; PROVIDING THAT QUALIFYING NATURAL GAS PRODUCTION AND QUALIFYING NATURAL GAS PRODUCTION FROM HORIZONTALLY COMPLETED WELLS ARE TAXED AT A HIGHER RATE DURING A CALENDAR QUARTER IF THE PRICE OF A MILLION BRITISH THERMAL UNITS EXCEEDS A CERTAIN AMOUNT; AMENDING SECTION 15-36-304, MCA; AND PROVIDING A DELAYED EFFECTIVE DATE AND AN APPLICABILITY DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 15-36-304, MCA, is amended to read:
"15-36-304. Production tax rates imposed on oil and natural gas. (1) The production of oil and natural gas is taxed as provided in this section. The tax is distributed as provided in 15-36-331 and 15-36-332.
(2) Natural gas is taxed on the gross taxable value of production based on the type of well and type of production according to the following schedule for working interest and nonworking interest owners:
Working & #160; Nonworking
Interest &# 160; Interest
(a) (i) first 12 months of qualifying production 0.5% 14.8%
(ii) after 12 months: 0;
(A) pre-1999 wells 14.8% 14.8%
(B) post-1999 wells 9% 0; 14.8%
(b) stripper natural gas pre-1999 wells 11% 14.8%
(c) horizontally completed well production:
(i) first 18 months of qualifying production 0.5% 14.8%
(ii) after 18 months 9% &# 160; 14.8%
(3) (a) The Except as provided in subsection (3)(b), the reduced tax rates rate under subsection (2)(a)(i) on qualifying production for the first 12 months of natural gas production from a well begins following the last day of the calendar month immediately preceding the month in which natural gas is placed in a natural gas distribution system, provided that notification has been given to the department.
(b) For natural gas wells drilled after December 31, 2007, qualifying production is taxed as provided in subsection (2)(a)(i) only if the average Henry hub spot price of a million British thermal units (Btu's) of natural gas as reported in the Wall Street Journal in a calendar quarter is less than $4 a million Btu's. If the average Henry hub spot price of a million Btu's of natural gas is equal to or greater than $4 a million Btu's in the calendar quarter, then qualifying natural gas production is taxed at the rate imposed in subsection (2)(a)(ii)(B) for that quarter.
(c) For the purposes of subsection (3)(b), the average price of a million Btu's of natural gas must be computed by dividing the sum of the daily Henry hub spot price of a million Btu's of natural gas as reported in the Wall Street Journal for the calendar quarter by the number of days on which the price was reported in the quarter.
(4) (a) The Except as provided in subsection (4)(b), the reduced tax rate under subsection (2)(c)(i) on qualifying production from a horizontally completed well for the first 18 months of production begins following the last day of the calendar month immediately preceding the month in which natural gas is placed in a natural gas distribution system, provided that notification has been given to the department.
(b) For horizontally completed wells drilled after December 31, 2007, qualifying production is taxed as provided in subsection (2)(c)(i) only if the average Henry hub spot price of a million Btu's of natural gas as reported in the Wall Street Journal in a calendar quarter is less than $4 a million Btu's. If the average Henry hub spot price of a million Btu's of natural gas is equal to or greater than $4 a million Btu's in the calendar quarter, then qualifying production from horizontally completed wells is taxed at the rate imposed in subsection (2)(c)(ii) for that quarter.
(c) For the purposes of subsection (4)(b), the average spot price of a million Btu's of natural gas must be computed by dividing the sum of the daily Henry hub spot price of a million Btu's of natural gas as reported in the Wall Street Journal for the calendar quarter by the number of days on which the price was reported in the quarter.
(5) Oil is taxed on the gross taxable value of production based on the type of well and type of production according to the following schedule for working interest and nonworking interest owners:
Working Nonworking
Interest &# 160; Interest
(a) primary recovery production:
(i) first 12 months of qualifying production 0.5% 14.8%
(ii) after 12 months: 0;
(A) pre-1999 wells 12.5% 14.8%
(B) post-1999 wells 9% 0;14.8%
(b) stripper oil production:
(i) first 1 through 10 barrels a day production 5.5% 14.8%
(ii) more than 10 barrels a day production 9.0% 14.8%
(c) (i) stripper well exemption production0.5%14.8%
(ii) stripper well bonus production6.0%14.8%
(d) horizontally completed well production:
(i) first 18 months of qualifying production 0.5% 14.8%
(ii) after 18 months: 0;
(A) pre-1999 wells 12.5% 14.8%
(B) post-1999 wells 9% 0;14.8%
(e) incremental production: < /span>
(i) new or expanded secondary recovery production 8.5% 14.8%
(ii) new or expanded tertiary production 5.8% 14.8%
(f) horizontally recompleted well:
(i) first 18 months 5.5% < /span>14.8%
(ii) after 18 months: 0;
(A) pre-1999 wells 12.5% 14.8%
(B) post-1999 wells 9% 0;14.8%
(6) (a) (i) The Except as provided in subsection (6)(a)(ii), the reduced tax rates rate under subsection (5)(a)(i) on primary recovery oil production for the first 12 months of oil production from a well begins following the last day of the calendar month immediately preceding the month in which oil is pumped or flows, provided that notification has been given to the department.
(ii) For primary recovery wells drilled after December 31, 2007, primary recovery production is taxed as provided in subsection (5)(a)(i) only if the average price for each barrel of oil as reported in the Wall Street Journal for west Texas intermediate crude oil in a calendar quarter is less than $38 a barrel. If the average price of a barrel of oil is equal to or greater than $38 a barrel in the calendar quarter, then primary recovery production is taxed at the rate imposed in subsection (5)(a)(ii)(B) for that quarter.
(b) (i) (A) The Except as provided in subsection (6)(b)(i)(B), the reduced tax rates rate under subsection (5)(d)(i) on oil production from a horizontally completed well for the first 18 months of production begins following the last day of the calendar month immediately preceding the month in which oil is pumped or flows if the well has been certified as a horizontally completed well to the department by the board.
(B) For horizontally completed wells drilled after December 31, 2007, horizontally completed well production is taxed as provided in subsection (5)(d)(i) only if the average price for each barrel of oil as reported in the Wall Street Journal for west Texas intermediate crude oil in the calendar quarter is less than $38 a barrel. If the average price of a barrel of oil is equal to or greater than $38 a barrel in the calendar quarter, then horizontally completed well production is taxed at the rate imposed in subsection (5)(d)(ii)(B) for that quarter.
(ii) The reduced tax rate under subsection (5)(f)(i) on oil production from a horizontally recompleted well for the first 18 months of production begins following the last day of the calendar month immediately preceding the month in which oil is pumped or flows if the well has been certified as a horizontally recompleted well to the department by the board.
(c) Incremental production is taxed as provided in subsection (5)(e) only if the average price for each barrel of oil as reported in the Wall Street Journal for west Texas intermediate crude oil during a calendar quarter is less than $30 a barrel. If the price of oil is equal to or greater than $30 a barrel in a calendar quarter as determined in subsection (6)(d) (6)(e), then incremental production from pre-1999 wells and from post-1999 wells is taxed at the rate imposed on primary recovery production under subsections (5)(a)(ii)(A) and (5)(a)(ii)(B), respectively, for production occurring in that quarter, other than exempt stripper well production.
(d) (i) Stripper well exemption production is taxed as provided in subsection (5)(c)(i) only if the average price for a barrel of oil as reported in the Wall Street Journal for west Texas intermediate crude oil during a calendar quarter is less than $38 a barrel. If the price of oil is equal to or greater than $38 a barrel, as determined in subsection (6)(e), there is no stripper well exemption tax rate and oil produced from a well that produces 3 barrels a day or less is taxed as stripper well bonus production.
(ii) Stripper well bonus production is subject to taxation as provided in subsection (5)(c)(ii) only if the average price for a barrel of oil as reported in the Wall Street Journal for west Texas intermediate crude oil during a calendar quarter is equal to or greater than $38 a barrel, as determined in subsection (6)(e).
(e) For the purposes of subsections (6)(c) and (6)(a) through (6)(d), the average price for each barrel must be computed by dividing the sum of the daily price for west Texas intermediate crude oil as reported in the Wall Street Journal for the calendar quarter by the number of days on which the price was reported in the quarter.
(7) (a) The tax rates imposed under subsections (2) and (5) on working interest owners and nonworking interest owners must be adjusted to include the total of the privilege and license tax adopted by the board of oil and gas conservation pursuant to 82-11-131 and the derived rate for the oil, gas, and coal natural resource account as determined under subsection (7)(b).
(b) The total of the privilege and license tax and the tax for the oil, gas, and coal natural resource account may not exceed 0.3%. The base rate for the tax for oil, gas, and coal natural resource account funding is 0.08%, but when the rate adopted pursuant to 82-11-131 by the board of oil and gas conservation for the privilege and license tax:
(i) exceeds 0.22%, the rate for the tax to fund the oil, gas, and coal natural resource account is equal to the difference between the rate adopted by the board of oil and gas conservation and 0.3%; or
(ii) is less than 0.18%, the rate for the tax to fund the oil, gas, and coal natural resource account is equal to the difference between the rate adopted by the board of oil and gas conservation and 0.26%.
(c) The board of oil and gas conservation shall give the department at least 90 days' notice of any change in the rate adopted by the board. Any rate change of the tax to fund the oil, gas, and coal natural resource account is effective at the same time that the board of oil and gas conservation rate is effective."
NEW SECTION. Section 2. Effective date. [This act] is effective January 1, 2008.
NEW SECTION. Section 3. Applicability. [This act] applies to oil and natural gas wells drilled after December 31, 2007, and to oil and natural gas produced and sold after December 31, 2007.
- END -
Latest Version of SB 561 (SB0561.01)
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